What Are the Pros & Cons of Seeking Investors for Your Startup?
By News & Articles

Owning a business is the dream of every potential entrepreneur. It is not an easy fit but when achieved, can last for a lifetime if well managed. Owning a business is not as easy as it sounds as the business owner has to continually strive and look for ways to improve and stay above the competition in the marketplace. One of the challenges entrepreneurs face is finding investors for their companies. Funding has always been a limiting factor for most business owners and the only way around this is to either get a loan or find investors. However, there are pros and cons of finding investors. 

Pros:

  • You benefit from their expertise.

Bringing in an investor into your business means bringing in his experience and expertise into your business. Since he is an investor, they will make suggestions and introductions that will be beneficial to the business. 

  • They bring the capital.

This is the major reason why companies look for investors. They need to grow their business and obtain a larger coverage. Investors provide enough funding for the business and this also positively affects the credit history of the company. 

  • Name of the investor.

Some investors are needed to invest in businesses not because of the funds they bring along with them but because of the good reputation they have. You need investors for your company so you can improve the image of your company and open doors for more investors and clients.

  • Less loan repayment pressure.

Unlike when loans are involved, investors do not pressure you to pay up what they have invested in the business. You do not have tight repayment deadlines that leave you confused and prone to bad business decisions in a bid to meet up.

  • Inspiration and motivation:

Getting investors with a lot of business experience could also mean additional moral support for you. They inspire and motivate you to do better for your business growth. 

Cons:

  • Struggle for authority.

Some business owners love to maintain full authority over their business. Some investors may not like this and would like to interfere in the decision-making process. They may make decisions you may consider unprofitable for your company.

  • Contrasting dreams of investor and business owner.

Business owners have dreams that would benefit their business in the long term while investors are after the money and would rather prefer to make business decisions that would only benefit the company short term.

  • Freedom to change your business direction.

As the business grows, you may want to expand or change your line of business based on your creativity. Some investors may consider this bad and kick against it. Having investors places restrictions on your right to change your business direction.

Having investors in your business is beneficial, however, it is pertinent that you take time to consider the pros and cons of finding investors before you proceed to invite them into your business. You should also take time to draft the legal document and ensure they cover the areas that protect your interest as a business owner.